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 Big Trail Running Company hasstarted to produce running apparel in addition to the trail r shoes that they have manufactured for years

Accounting Feb 07, 2021

 Big Trail Running Company hasstarted to produce running apparel in addition to the trail r shoes that they have manufactured for years. They feel that a departmental overhead rate w best reflect their overall manufacturing overhead usage. Based on research the following information was gathered for the upcoming year 
Machining Department Finishing Department Estimated Manufacturing Overhead by Department 5800.000 $100.000 Trail Running Shoes 350.000 machine hours 19000 direct labor hours Running Apparel 50.000 machine hours 81000 direct labor hours 
Manufacturing overhead is driven by machine hours for the machining department and dire labor hours for the finishing department 
At the end of the year. the following information was gathered related to the production of t running shoes and running apparel. 
Machining Department Finishing Department Trail Running Shoes 352.000 hours 18.500 hours Running Apparel 47.000 hours 82.000 hours 
How much manufacturing overhead will be allocated to the trail running shoes? (Round an intermediary calculations to the nearest cent and your final answer to the nearest dollar) A) $225,000 6)8728,746 C) $898,625 D) 5727.125 

Expert Solution

Answer

D )

Explanation

Computation of Departmental Overhead Rate for Machining Department:    
           
Overhead rate Total overhead/Estimated machine hours  
Overhead rate 800000/(350000+50000)    
Overhead rate 800000/400000      
Overhead rate $2.00  per machine hour    
           
Computation of Departmental Overhead Rate for Finishing Department:    
           
Overhead rate Total overhead/Estimated machine hours  
  100000/(19000+61000)      
  100000/80000      
Overhead rate $1.25  per direct labor hour    
           
Computation of Manufacturing Overhead allocated to Trail running shoes:      
Machining department $704,000  352000*$2    
Finishing department $23,125  18500*$1.25      
Total Costs Allocated $727,125         
           
Thus, total manufacturing overhead allocated to trail running shoes is $727,125.
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